The Broadcom stock price has surged to a record high, bringing its market capitalization to over $1.17 trillion, making it the eighth biggest company globally. AVGO has surged by over 80% from its lowest point in April, making it one of the best-performing tech companies in the US.
Broadcom stock price forecast: risky pattern forms ahead of earnings
With the AVGO stock price sitting at its all-time high, technical analysis is one of the best approaches to forecast its future.
The daily chart shows that the Broadcom share price bottomed at $138.25 in April as Donald Trump introduced his retaliatory tariffs. He also announced measures to limit chips sold to China.
Broadcom stock then bounced back and retested its all-time high. The rally accelerated after NVIDIA published strong financial results, which showed that there was still high demand for artificial intelligence tools.
The chart shows that Broadcom stock has jumped above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls remains in control.
Read more: Broadcom stock unique pattern points to AVGO hitting $200
Also, the Average Directional Index (ADX) has jumped to 35, its highest level since January 27. An ADX figure of 25 and above is a sign that trend is strengthening.
Top oscillators like the Relative Strength Index (RSI) and the MACD have all pointed upwards.
The risk, however, is that the AVGO stock has formed a double-top pattern at $248, whose neckline is at $138. A double-top is one of the most bearish reversal patterns in technical analysis.
Therefore, the stock may pull back in the coming days, especially when it publishes its financial results on Thursday. If these numbers are weak, it means that the stock may retreat to the psychological point at $200, down by 20% from the current level.
On the flip side, a move above the psychological point at $250 will point to more gains, potentially to $300.
AVGO earnings ahead
The next important catalyst for the Broadcom share price will be its earnings, which will provide more color on its artificial intelligence business.
Its most recent results showed that its revenue rose by 25% in the first quarter to $14.9 billion. This revenue was driven by its AI semiconductor, software, and infrastructure.
The adjusted EBITDA rose by 68% to $10 billion, making it one of the fastest-growing companies in the tech industry.
Wall Street analysts expect the upcoming results to show that its revenue rose by 19% in the second quarter to $14.97 billion. The most optimistic analyst estimates that its revenue will come in at $15.95 billion.
Broadcom’s revenue will likely be better than its guidance since the management is often highly conservative. Analysts anticipate that the annual revenue will be $62.7 billion this year, followed by $72 billion next year.
The company’s profitability is also accelerating, with analysts expecting its earnings per share will be $1.57, up from $1.1 in the last quarter last year.
Broadcom’s revenue growth has been driven by its large acquisitions that have helped it to diversity its revenue. The most recent large acquisition was VMware in a $68 billion deal.
Broadcom is also said to be considering making a bid for some parts of Intel, a semiconductor pioneer going through a rough patch.
Analysts believe that Broadcom stock is fairly valued, with the average estimate being $248.78, where it is trading now.
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